JOHANNESBURG, South Africa — South African competition authorities on Tuesday approved Walmart’s bid for local retail group Massmart, with conditions aimed at protecting jobs.
The $2.4 billion deal would see the U.S. retail giant acquire a controlling stake in Massmart and gain a foothold on the African continent, with its increasingly important emerging market of consumers.
However, under the conditions of the deal, Walmart must not cut any South African jobs for two years, the country's Competition Tribunal said in a statement. The companies must ensure that existing labor agreements are honored for three years after the takeover, and must create a $14.6 million fund for developing local suppliers.
The deal is seen as a test case for growing foreign investment in Africa, with South Africa as a gateway economy. Walmart plans to use Massmart, which has almost 300 stores in 14 countries in Africa, as a stepping stone for expansion in sub-Saharan Africa.
But the South African government and the country’s powerful trade unions have opposed the deal, raising concerns about cheap imports flooding the market and job losses in a country with 25 percent official unemployment. Trade unionists have argued that Walmart is known for being anti-union.
Full reasons for the decision, which followed hearings in Pretoria earlier this month, will be made public within 20 working days.
Walmart International is "pleased" with the antitrust regulator's decision, CEO Doug McMillon said in a statement.
"The combined Walmart/Massmart entity is planning significant new store openings, which will create thousands of new union jobs in South Africa, while in excess of a 50 percent growth is being anticipated in the Massmart food business over a five year period," McMillon said.
Shares in Massmart gained slightly after news of the decision, rising 1.4 percent to 142.02 rand, Reuters reports.